NATIONAL DATA CORPORATION
PROXY STATEMENT
ANNUAL MEETING - NOVEMBER 17, 1994
The enclosed proxy is solicited by the Board of Directors of National Data
Corporation (the "Company") for use at the Annual Meeting of Stockholders (the
"Annual Meeting") of the Company to be held on November 17, 1994, and at any
adjournments thereof. The enclosed proxy is revocable at any time before its
exercise at the Annual Meeting by (i) written notice to the Secretary of the
Company, (ii) properly submitting to the Company a duly executed proxy bearing a
later date, or (iii) attending the Annual Meeting and voting in person.
This Proxy Statement is being mailed by the Company to its stockholders on or
about September 21, 1994. The Company's Annual Report to Stockholders for the
fiscal year ended May 31, 1994, including financial statements, is being sent to
the stockholders with this Proxy Statement.
Only holders of record of the Company's Common Stock, par value $.125 per
share (the "Common Stock"), as of the close of the business on September 19,
1994 (the "Record Date") are entitled to notice of, and to vote at, the Annual
Meeting. As of the Record Date the Company had 12,697,018 shares of Common
Stock outstanding and entitled to be voted at the Annual Meeting. A stockholder
is entitled to one vote for each share of Common Stock held.
1. ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into three classes, with the
term of office of each class ending in successive years. The terms of directors
of Class II expire with this Annual Meeting. The directors in Class III and
Class I expire at the 1995 and 1996 annual meetings of stockholders. The
stockholders are being asked to vote on the election to Class II of Messrs.
Edward L. Barlow and Neil Williams, both of whom are currently Class II
directors. Each Class II director will be elected to hold office until the 1997
annual meeting of stockholders and thereafter until his successor has been duly
elected and qualified. The persons named in the enclosed proxy intend to vote
the shares represented thereby in favor of the election to the Board of each of
the two Class II nominees whose names appear below, unless authority to vote for
either or both of the nominees is withheld or such proxy has previously been
revoked. It is anticipated that management stockholders of the Company will
grant authority to vote for the election of both nominees. In the event that
either nominee is unable to serve (which is not anticipated), the persons
designated as proxies will cast votes for the remaining nominee and for such
other persons as they may select.
The affirmative vote of the holders of a majority of the shares of Common Stock
represented and entitled to vote at the Annual Meeting at which a quorum is
present is required for the election of the nominees. With respect to
abstentions, the shares are considered present at the meeting, but since they
are not affirmative votes, they will have the same effect as votes against the
proposal. With respect to broker non-votes, the shares are not considered
present at the meeting for the particular proposal for which the broker withheld
authority. The Board of Directors recommends that stockholders check "Authority
Granted" to vote for the election of both of the nominees. If a choice is
specified on the proxy by the stockholder, the shares will be voted as
specified. If no specification is made, the shares will be voted "FOR" both of
the nominees.
Certain Information Concerning Nominees and Directors
The following table sets forth the names of the nominees and the directors
continuing in office, their ages, the month and year in which they first became
directors of the Company, their positions with the Company, their principal
occupations and employers for at least the past five years, and any other
directorships held by them in companies that are subject to the reporting
requirements of the Securities Exchange Act of 1934 or any company registered
as an investment company under the Investment Company Act of 1940. For
information concerning membership on committees of the Board, see "Other
Information About the Board and its Committees" below.
Month and Positions with the Company,
Year First Principal Occupations During
Became a at Least Past Five Years,
Name and Age Director and Other Directorships
NOMINEES FOR DIRECTOR
Class II
For Three-Year Term Expiring Annual Meeting 1997
Edward L. Barlow January 1969 Director of the Company
(59) General Partner, Whitcom Partners
(an investment partnership), New York.
Neil Williams April 1977 Director of the Company
(58) Managing Partner, Alston & Bird
(Attorneys and Counsel
for the Company), Atlanta.
MEMBERS OF THE BOARD OF DIRECTORS
CONTINUING IN OFFICE
Class III
Term Expiring Annual Meeting 1995
Don W. Sands September 1989 Director of the Company
(68) Chairman, Georgia World Congress Center,
Atlanta (since 1993); Chief Executive
Officer Emeritus and Counselor
to the Board of Directors
of Gold Kist Inc. (a diversified
agricultural co-operative
association), Atlanta
(since November 1991);
President, Chief Executive Officer,
and Chairman of the Management Executive
Committee of Gold Kist Inc. (1988-1991)
Director of Golden Poultry Co.
Ira C. Herbert July 1990 Director of the Company
Retired
Former President, Coca-Cola
North America and
other executive positions, The Coca-Cola
Company, Atlanta (1965-1992).
Class I
Term Expiring Annual Meeting 1996
Robert A. Yellowlees April 1985 Chairman of the Board (since June 1992) and
(55) Chief Executive Officer and President and
Chief Opeating Officer (since May 1992)
of the Company
Various management and executive positions
with International Business Machines
Corporation (1960-1982); Chairman,
Spectrum Research Group, Inc.
(consultants on the
management of technology), Atlanta
Director of John H. Harland Co.
James B. Edwards January 1989 Director of the Company
(67) President, The Medical University of South
Carolina
Director of Phillips Petroleum Company;
Brendle's, Inc.; SCANA Corporation;
Chemical Waste Management, Inc.;
Imo Industries, Inc.; and
Communications Satellite Corporation.
Other Information About the Board and Its Committees
Meetings and Compensation. During the fiscal year ended May 31, 1994, the
Company's Board of Directors held 14 meetings. The Company's policy regarding
the compensation of directors is to pay directors who are not also employees of
the Company $2,000 per month plus $1,000 per meeting attended. Each member
of the Audit and Compensation Committees receives $1,000 per Audit or
Compensation Committee meeting attended in addition to his other compensation
as a director.
Non-employee directors are also eligible for certain retirement benefits. Upon
reaching retirement age (70 years of age), each non-employee director with five
or more years of service to the Company as a director will receive a retirement
benefit which will generally continue annually thereafter for the lesser of (i)
the number of years equal to the number of years the individual served as a
director or (ii) ten years. In the case of non-employee directors with greater
than ten years service as a director on the effective date of the retirement
plan (December 18, 1991), however, the retirement benefit will continue for
fifteen years. The retirement benefit will be calculated from a base amount
equal to the annual retainer for non-employee directors in effect on the date
of a director's retirement. The retired director would receive as the retirement
benefit 50% of the base amount plus 10% for each year of service up to 100% of
the base amount for ten years' service. As of September 19, 1994, Messrs.
Barlow, Williams, Edwards, Sands and Herbert had 25-8/12, 17-5/12, 5-8/12, 5
and 4-2/12 years of service as directors for purposes of the Directors
Retirement Plan. In the event of a change in control of the Company, each non-
employee director will be deemed to have completed 10 years of service as a
director and will be paid the retirement benefit if his service as a director of
the Company is terminated, with his benefit commencing upon his termination as
a director.
The Company also maintains the 1984 Non-Employee Directors Stock Option Plan
(the "Directors Plan"), which was approved by the stockholders in 1984 and
amended by the stockholders in 1989. The Directors Plan currently provides that
non-employee directors may be granted options for up to a total of 230,000
shares of Common Stock under the Directors Plan; that each eligible director
may receive up to five options to purchase 5,000 shares, one for each year of
service as a director; and that each newly elected director be granted an
option to acquire 5,000 shares after the first annual meeting of stockholders
following such director's election. Options granted under the Directors Plan
are exercisable immediately at a price equal to the fair market value (as
defined in the Directors Plan) of Common Stock at the date of the grant.
During the 1994 fiscal year (which ended on May 31, 1994), options for 25,000
shares of Common Stock were granted under the Directors Plan to non-employee
directors at a purchase price per share of $16.25. In the 1994 fiscal year, no
options were exercised under the Directors Plan.
Committees. The Company's Board of Directors has an Audit Committee, a Stock
Option Committee and a Compensation Committee. The Company does not have
a nominating committee. The full Board of Directors performs the function which
would be performed by a nominating committee. Certain information regarding the
functions of the Board's Committees and their present membership is provided
below.
Audit Committee. The Company's Board of Directors has an Audit Committee
composed of Messrs. Barlow (Chairman), Sands and Williams. The Audit
Committee annually reviews and recommends to the Board the firm to be engaged
as independent auditors for the next fiscal year, reviews with the independent
auditors the plan and results of the auditing engagement, reviews the scope and
results of the Company's procedures for internal auditing, and inquires as to
the adequacy of the Company's internal accounting controls. During the fiscal
year ended May 31, 1994, the Audit Committee held three meetings, each of which
was separate from regular Board meetings.
Stock Option Committee. The Board of Directors has a Stock Option Committee
composed of Messrs. Edwards, Herbert (Chairman) and Sands to administer the
Company's 1982 Incentive Stock Option Plan, the Company's 1983 Restricted
Stock Plan, and the Company's 1987 Stock Option Plan. During the fiscal year
ended May 31, 1994, the Stock Option Committee held seven meetings, each of
which was held at regular Board meetings.
Compensation Committee Interlocks and Insider Participation. The Board of
Directors also has a Compensation Committee composed of Messrs. Edwards and
Herbert (Chairman). This Committee reviews and recommends to the Board levels
of compensation for the Company's executive officers. During the fiscal year
ended May 31, 1994, the Compensation Committee held six meetings, all of
which were separate from regular Board meetings. Neither of the members of the
Compensation Committee served as an officer or an employee of the Company
during the fiscal year ended May 31, 1994.
Common Stock Ownership of Management
The following table sets forth information as of September 19, 1994 with
respect to the beneficial ownership of Common Stock by the directors of the
Company, by each of the executive officers named in the Summary Compensation
Table on page 9, and by the 15 persons, as a group, who were directors and/or
executive officers of the Company on September 19, 1994.
Amount and Nature of Percent
Name Beneficial Ownership <F1> Class <F1>
Edward L. Barlow 75,000 <F2> *
Neil Williams 50,890 <F3> *
Robert A. Yellowlees 291,431 <F4> 2.3%
James B. Edwards 25,300 <F5> *
Don W. Sands 32,500 <F6> *
Ira C. Herbert 20,000 <F7> *
J. David Lyons 0 -
James R. Henderson 9,250 <F8> *
Jerry W. Braxt 18,496 <F9> *
Kevin C. Shea 36,005 <F10> *
All Directors and
Executive Officers
(15 persons) as a Group 593,336 <F11> 4.5%
*Less than one percent.
<FN>
<F1> The amounts and percentages of Common Stock beneficially owned are
reported on the basis of regulations of the Securities and Exchange
Commission governing the determination of beneficial ownership of
securities. The beneficial owner has both voting and investment power
over the shares, unless otherwise indicated.
<F2> This amount includes 40,000 shares of Common Stock of which Mr.
Barlow has the right to acquire beneficial ownership.
<F3> This amount includes 40,000 shares of Common Stock of which Mr.
Williams has the right to acquire beneficial ownership.
<F4> This amount includes 153,000 shares of Common Stock of which Mr.
Yellowlees has the right to acquire beneficial ownership, 62,333 shares of
restricted stock over which he currently has sole voting power only and
1,893 shares held by Mr. Yellowlees' wife as to which he disclaims all
beneficial ownership.
<F5> This amount includes 25,000 shares of Common Stock of which Mr.
Edwards has the right to acquire beneficial ownership.
<F6> This amount includes 25,000 shares of Common Stock of which Mr. Sands
has the right to acquire beneficial ownership.
<F7> This amount consists of 20,000 shares of Common Stock of which Mr.
Herbert has the right to acquire beneficial ownership.
<F8> This amount consists of 6,250 shares of Common Stock of which Mr.
Henderson has the right to acquire beneficial ownership and 3,000 shares
of restricted stock over which he currently has sole voting power only.
<F9> This amount includes 13,500 shares of Common Stock of which Mr.
Braxton has the right to acquire beneficial ownership and 3,000 shares of
restricted stock over which he currently has sole voting power only.
<F10> This amount includes 28,417 shares of Common Stock of which Mr. Shea
has the right to acquire beneficial ownership and 3,000 shares of restricted
stock over which he currently has sole voting power only.
<F11> This amount includes 372,253 shares of Common Stock of which the
directors and executive officers, as a group, have the right to acquire
beneficial ownership and 77,833 shares of restricted stock over which the
beneficial owners have sole voting power only.
</FN>
Common Stock Ownership by Certain Other Persons
The following table sets forth information as of the date indicated with respect
to the only persons who are known by the Company to be the beneficial owners of
more than 5% of the outstanding shares of Common Stock.
Name and Address Amount and Nature Percent
of Beneficial Owner Date of Beneficial Ownership of Class
Joseph L. Harrosh <F1> April 8, 1994 817,100 6.8%
40900 Grimmer Blvd.
Fremont, CA 94538
Montgomery Asset <F2> February 11, 1994 787,482 6.4%
Management, L.P.
600 Montgomery Street
San Francisco, CA 94111
<FN>
<F1> This information is contained in an amendment dated April 18, 1994, to a
Schedule 13D originally dated October 14, 1992 filed by Mr. Harrosh with
the Securities and Exchange Commission, copies of which were received
by the Company. Such Schedule 13D, as amended, states that the
reporting person has sole dispositive and voting power with respect to all
such shares.
<F2> This information is contained in a Schedule 13G dated February 11, 1994
filed by Montgomery Asset Management, L.P. with the Securities and
Exchange Commission, a copy of which was received by the Company.
Such Schedule 13G states that Montgomery Asset Management has sole
voting and dispositive power with respect to all such shares.
</FN>
Report of the Compensation and Stock Option Committees
Decisions on compensation of the Company's executive officers generally are
made by the two-member Compensation Committee of the Board. Decisions on
the stock-based plans are made by the three-member Stock Option Committee. All
decisions by the Compensation Committee relating to the compensation of the
Company's executive officers are reviewed by the full Board. Decisions of the
Stock Option Committee are made solely by that committee in order for awards or
grants under the Company's equity-based plans to satisfy Rule 16b-3 pursuant to
the Securities Exchange Act of 1934, as amended.
The Company's primary objective in designing and implementing its compensation
programs is to maximize stockholder value over time through alignment of
employee compensation with this objective. To accomplish this objective, the
Company has adopted a comprehensive business strategy. The overall goal of the
Compensation and Stock Option Committees is to develop executive
compensation policies and equity-based programs which are consistent with and
linked to the Company's strategic and annual business objectives.
Compensation Philosophy
The Compensation and Stock Option Committees have adopted certain principles
which they apply in structuring the compensation opportunity for executive
officers. These are:
Long Term and At-Risk Focus. A significant percentage of total compensation for
executive officers should be composed of long term, at-risk rewards to focus
senior management on the long term interests of stockholders. Equity-based plans
should comprise a major part of the long term, at-risk portion of total
compensation to encourage stockholder value-based management decisions, and to
link compensation to Company performance and stockholder interests.
Short Term and At Risk Focus. A significant portion of cash compensation for
executives is linked to achievement of the annual business plan. This includes
cash bonuses that may be approved by the Compensation Committee relating to
those objectives. There is real risk in bonuses paid under this plan,
recognizing variability in individual, unit and overall company performance.
Competitiveness. Base pay and total compensation should be competitive with
other similar companies based upon size, products and markets. A proxy survey
of peer group companies is conducted periodically. The peer group surveyed is a
subset of the companies contained in the Standard and Poor's Computer Software
and Services Index used in the stockholder return analysis shown later.
Stock Option Awards and Restricted Stock Grants
Equity-based compensation comprises a significant portion of the
Company's executive officer compensation programs. These plans are
administered solely by the Stock Option Committee. There are two Company plans
utilized for this component of executive officer, long term, equity-oriented
compensation. These involve Stock Options and Restricted Stock grants:
Stock Options. Options provide executive officers with the opportunity to
achieve an equity interest in the Company. Stock options are granted at 100%
of fair market value on the date of grant and have 10-year terms. In the past,
stock options generally became exercisable in one-fourth increments annually
beginning one year after grant. Effective with grants after May 31, 1994, the
Stock Option Committee adopted an extended vesting schedule under which options
vest 20% two years after the date of grant, an additional 25% after three
years, an additional 25% after four years, and the remaining 30% after five
years. The objective of this change was to further emphasize a long term focus
by executive officers in the acquisition and holding of Common Stock. The number
of stock options granted to an individual is based upon the responsibility level
of the individual's position, the individual's potential and current per-
formance and external competitive conditions, with an objective of fostering
broad-based equity participation. Annual grant amounts vary as a result of the
individual's prior year and potential future performance and the number of
options required to achieve target grant values based on the prevailing fair
market value of the Common Stock.
Restricted Stock. Restricted stock grants are designed to further focus
executive officers on the longer term performance of the Company. Grants of
restricted shares are subject to forfeiture if an executive officer, among other
conditions, fails to perform or leaves the Company prior to expiration of the
restricted period. Restricted periods are generally from two to three years.
New Target Stock Ownership Plan
The Company's Board of Directors and management believe that significant stock
ownership is a major incentive in building stockholder value and aligning the
interests of executives and stockholders. The Board has therefore recently
adopted guidelines for minimum stock ownership by senior executives.
To encourage this growth in stockholder wealth, the Company believes that senior
executives who are in a position to make a significant contribution to the long
term success of the Company should have a significant stake in its ongoing
success. Guidelines are based upon a multiple of base salary and range from
.8 to 3 times annual salary amounts. Executives are encouraged to achieve these
guidelines by building stock ownership over a period of approximately five
years.
Chief Executive Officer's Compensation
Mr. Yellowlees' fiscal year 1994 compensation derived primarily from commitments
under Mr. Yellowlees' employment agreement (see "Employment Agreements -
Robert A. Yellowlees" below) entered into prior to fiscal year 1994. The only
decisions affecting compensation made after that date related to Mr. Yellowlees'
fiscal year 1994 incentive bonus payment, and grants of stock options and
restricted stock.
Mr. Yellowlees' target annual bonus was set in his employment agreement, based
upon non-specific quantitative and qualitative performance. In deciding upon Mr.
Yellowlees' fiscal year 1994 bonus payment, the factors given the greatest
weight were the Company's 31% improvement from year to year in earnings per
share, 22% improvement in productivity (as measured by comparative gross
margins), 16% increase in market valuation, and the reversal of negative
revenue trends. In addition, the Compensation Committee recognized the progress
made in developing strategies and focusing the Company's energies in areas
designed to produce sustained future growth.
Mr. Yellowlees' base salary was established in May 1992, when he accepted the
positions of chairman and chief executive officer, and president and chief
operating officer. It was based upon the Company's previous history for
compensation of the executives that he succeeded, as well as information
gathered regarding base salaries of comparable executives at other companies in
the Company's industry. Effective June 1, 1993, Mr. Yellowlees received a base
compensation increase of 10%. This increase was based upon the Compensation
Committee's evaluation of Mr. Yellowlees' performance regarding revenue and
profit results for fiscal year 1993, and achievements in repositioning the
Company. During a six month period beginning March 1994, Mr. Yellowlees waived
10% of his base compensation in recognition of the need to set a leadership
example in the continuing effort to reduce expenses.
The Compensation Committee's general approach in setting Mr. Yellowlees' target
annual compensation is to seek to be competitive with other companies in the
Company's industry, but to have a large percentage of his target compensation
based upon current year performance as well as actions to provide sustained long
term growth in stockholder value. To accomplish this a mix of cash and stock
options are provided to Mr. Yellowlees, which include a significant element of
risk that is based upon the Company's performance. In accordance with this
general approach, and in recognition of Mr. Yellowlees' performance regarding
revenue and profit results in fiscal year 1993, the Stock Option Committee
awarded Mr. Yellowlees 26,000 shares of restricted stock and granted him
options to purchase 116,000 shares of Common Stock.
In May 1994, the Compensation Committee recommended, and the full Board of
Directors initiated action, to extend Mr. Yellowlees' employment agreement for a
term of three years from the expiration of his existing agreement. See
"Employment Agreements" below. The decision to renew Mr. Yellowlees'
employment agreement was based on several factors. Included among the
considerations were the progress made in developing a new strategy for the
Company focusing on revenue growth and productivity improvements, as well as
the Company's financial and market valuation performance during the first two
years of Mr. Yellowlees' tenure and the outlook for continuation of these
trends. Also considered was the requirement in Mr. Yellowlees' existing
agreement that its renewal be negotiated by the end of the second year of the
current agreement. The Compensation Committee believes that it is in the best
interests of the Company's stockholders to ensure the retention of Mr.
Yellowlees for this renewal term.
COMPENSATION COMMITTEE
James B. Edwards
Ira C. Herbert
STOCK OPTION COMMITTEE
James B. Edwards
Ira C. Herbert
Don W. Sands
Compensation and Other Benefits
The following table presents certain summary information concerning
compensation paid or accrued by the Company for services rendered in all
capacities during the fiscal years ended May 31, 1994 ("1994 fiscal year"), 1993
("1993 fiscal year") and 1992 ("1992 fiscal year"), for (i) the Chief Executive
Officer of the Company; and (ii) each of the four other most highly compensated
executive officers of the Company (determined as of the end of the last fiscal
year) whose total annual salary and bonus exceeded $100,000 (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards
Restricted Stock All Other
Name and Fiscal Award(s) Options Compensation
Principal Position Year<F1> Salary ($) Bonus ($) ($)<F2> (#)<F3> ($)<F4>
Robert A. Yellowlees 1994 $427,806 $175,000 $396,500 116,000 $66,488
Chairman and Chief 1993 399,557 95,000 1,259,250 138,000 57,131
Executive Officer and 1992<F5> - - - 90,000 -
President and Chief
Operating Officer
J. David Lyons 1994 168,635 55,917<F6> - 25,000 1,440
Executive Vice 1993<F7> - - - - -
President, 1992<F7> - - - - -
Marketing & Sales
James R. Henderson 1994 185,000 19,500 45,750 13,000 1,114
Executive Vice 1993 131,032 45,000 - 25,000 310
President, Health Care 1992<F8> - - - - -
Application Systems
and Services
Jerry W. Braxton 1994 158,077 20,000 45,750 10,000 5,321
Executive Vice 1993 145,976 40,000 - 12,000 834
President and Chief 1992<F9> 62,293 - - 15,000 -
Financial Officer
Kevin C. Shea 1994 144,200 19,000 45,750 10,000 488
Executive Vice 1993 141,741 40,000 - 18,667 1,027
President, Retail 1992 134,178 - - 15,000 -
Applications Systems
and Services
<FN>
<F1> In accordance with the transitional provisions applicable to the revised
rules on executive officers and director compensation disclosure adopted
by the Securities and Exchange Commission, amounts of Other Annual
Compensation and All Other Compensation are excluded for the
Company's 1992 fiscal year.
<F2> All awards of restricted shares to the Named Executive Officers have been
made under the National Data Corporation 1983 Restricted Stock Plan and
are valued in the table based upon the closing market prices of the
Common Stock on the grant dates. Grantees have the right to vote and
dividends are payable to the grantees with respect to all awards of
restricted shares reported in this column. As of May 31, 1994, the shares
listed in the table were the only outstanding grants of restricted shares.
The restrictions on 36,334 and 36,333 shares awarded to Mr. Yellowlees
expired on June 1, 1993, and June 1, 1994, respectively, and the
restrictions on 36,333 and 26,000 shares will expire on June 1, 1995 and
May 17, 1995, respectively. The restrictions on the awards to Messrs.
Henderson, Braxton and Shea all expire on June 27, 1995. The value of
the restricted stock held by the Named Executive Officers at May 31, 1994
was $1,652,656, $50,250, $50,250 and $50,250 for Messrs. Yellowlees,
Henderson, Braxton and Shea, respectively. The numbers of shares of
restricted stock held by Messrs. Yellowlees, Henderson, Braxton and Shea
at May 31, 1994 were 98,666, 3,000, 3,000, and 3,000, respectively.
<F3> All option awards granted to the Named Executive Officers were made
under the National Data Corporation 1987 Stock Option Plan.
<F4> For the 1994 fiscal year, includes for each of the indicated individuals the
following amounts representing (i) Company contributions to the
Company's Employee Savings Plan: Mr. Yellowlees - $4,500 and Mr.
Braxton - $4,422 and (ii) insurance premiums paid by the Company for
term life insurance policies for the benefit of the Named Executive Officer:
Mr. Yellowlees - $61,988; Mr. Lyons - $1,440; Mr. Henderson - $1,114; Mr.
Braxton - $899 and Mr. Shea - $488.
<F5> Mr. Yellowlees became an executive officer in May 1992.
<F6> Mr. Lyons received $47,917 of his bonus amount as a one-time award
made pursuant to the terms of his initial employment arrangements.
<F7> Mr. Lyons became an executive officer in June 1993.
<F8> Mr. Henderson became an executive officer in September 1992.
<F9> Mr. Braxton became an executive officer in January 1992.
</FN>
Option Grants. The following table sets forth information on options granted to
the Named Executive Officers in the 1994 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees in or Base Expiration Grant Date
Name Granted (#)<F1><F2>) Fiscal Year Price ($/Sh) Date Present Value ($)<F3>
Robert A. Yellowlees 116,000 24.0% $14.50 6/01/03 $800,400
J. David Lyons 25,000 5.2% 15.25 6/24/03 181,500
James R. Henderson 13,000 2.7% 14.50 6/01/03 89,700
Jerry W. Braxton 10,000 2.1% 14.50 6/01/03 69,000
Kevin C. Shea 10,000 2.1% 14.50 6/01/03 69,000
<FN>
<F1> The total number of shares covered by options granted to employees in
the 1994 fiscal year was 484,900.
<F2> These options were granted under the Company's 1987 Stock Option
Plan. The option agreements governing these grants provide that during
each of the three successive twelve-month periods of continued
employment commencing on the grant date, the option becomes
exercisable as to cumulative amounts equal to one-third of the total shares
covered by such option grant. Pursuant to the 1987 Stock Option Plan, the
Stock Option Committee of the Company's Board of Directors at any time
before the termination of an option may accelerate the time or times at
which such option may be exercised, in whole or in part.
<F3> These grant date values, based on the Black-Scholes option pricing model,
are for illustrative purposes only, and are not intended to be a forecast of
what future performance will be. The values are based upon the following
assumptions: (i) an expected stock price volatility of 0.48%; (ii) a risk-free
rate of return of 6.15%; (iii) a current dividend yield of 2.7%; and (iv) a
term of grant of 10 years.
</FN>
Option Exercises and Fiscal Year-End Values. The following table sets forth
information on the number and value of unexercised options held by the Named
Executive Officers as of May 31, 1994. None of the Named Executive Officers
exercised options during the fiscal year ended May 31, 1994.
FY-End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Options In-the-Money Options
at Fiscal Year-End (#) at Fiscal Year-End ($)
Name Exercisable Unexercisable Exercisable Unexercisable
Robert A. Yellowlees 153,000 215,000 $966,375 $951,750
J. David Lyons 0 25,000 0 37,500
James R. Henderson 6,250 31,750 54,688 193,312
Jerry W. Braxton 13,500 23,500 63,000 85,500
Kevin C. Shea 28,417 28,250 168,752 125,500
Retirement Plan. The Company maintains the National Data Corporation
Employees' Retirement Plan (the "Retirement Plan"), which provides monthly
benefits upon retirement to eligible employees, including officers. Most
employees become participants in the Retirement Plan after meeting certain
minimal eligibility requirements. The benefits provided upon normal retirement
at age 65 are equal to the sum of (i) a basic benefit based solely on the number
of the employee's completed years of continuous service at his normal retirement
date and (ii) a supplemental benefit calculated under a formula based on years
of continuous service and the employee's average earnings during the five years
of highest compensation during the ten years preceding his retirement, reduced
by an amount equal to 75% of the primary social security benefits to which the
employee is entitled. The term "earnings" for purposes of the Retirement Plan
means compensation of any kind paid by the Company to the participating employee
as reported on Internal Revenue Service Form W-2, but excluding the cost of
certain employee benefits (as defined) and excluding amounts which become
taxable to the employee under a stock option or other stock plan. The Retirement
Plan covers all eligible employees retiring after its effective date. The
following table shows estimated annual retirement benefits payable to
participants in the Retirement Plan on a straight life annuity basis upon
retirement in specified years of continuous service and remuneration classes.
The annual benefit amounts have been computed by multiplying the monthly benefit
payable under the Retirement Plan by 12.
Highest Estimated Annual Retirement Benefits
Five-Year Average Years of Continuous Service <F1>
Annual Earnings 15 20 25 30 35
$144,000 $33,120 $44,160 $ 55,200 $ 66,240 $ 77,280
192,000 43,620 58,560 73,200 87,840 102,480
240,000 54,720 72,960 91,200 109,440 127,680
288,000 65,520 87,360 109,200 131,040 152,880
336,000 76,320 101,760 127,200 152,640 178,080
384,000 87,120 116,160 145,200 174,280 203,280
432,000 97,920 130,560 163,200 195,480 228,480
480,000 108,720 144,960 181,200 217,440 253,680
<FN>
<F1> The average annual earnings for the highest five years over the last
10-year period and the eligible years of credited service as of May 31,
1994 for each of the Named Executive Officers was as follows: Mr.
Yellowlees (2 years) $548,682; Mr. Lyons (1 year) $224,552; Mr.
Henderson (1-9/12 years) $190,266; Mr. Braxton (2-4/12 years) $142,115;
Mr. Shea (7-2/12 years) $159,706. The amounts shown in the column
"Salary" in the Summary Compensation Table above are substantially
equal to the compensation of the individuals named in such table for
purposes of the Retirement Plan.
</FN>
The amounts shown in the foregoing table are subject to reduction by an amount
equal to a portion of the Social Security benefits payable to participants.
Also, under current law the retirement benefit for an employee at age 65 cannot
exceed $112,221 per year.
Employment Agreements.
Robert A. Yellowlees. The Company entered into an employment agreement with
Robert A. Yellowlees, effective as of May 18, 1992, providing for his employment
as Chief Executive Officer for a term continuing through May 17, 1995. The
agreement also provides that Mr. Yellowlees will serve as Chairman of the Board
and that during the term of the agreement the Company will use its best efforts
to cause him to be nominated and elected as a director of the Company.
The agreement provides for a minimum annual base salary of $395,000, subject to
yearly review, and additional annual bonus targets equal to Mr. Yellowlees' base
salary for each year for which the bonus is to be paid. The actual bonus paid
for any year may range from none to 150% of the target amount and will be based
upon qualitative and quantitative standards agreed upon by Mr. Yellowlees and
the Company, upon recommendation by the Compensation Committee of the Board of
Directors and approval by the Board. The bonus will be paid, at Mr. Yellowlees'
election, in whole or in part, in shares of Common Stock. Mr. Yellowlees is also
entitled to participate in all other benefit plans maintained by the Company for
executive officers, and his years of service as a director while an employee
will be included in his years of service for purposes of determination of
eligibility for benefits under and computation of the amount of benefits payable
under the Retirement Plan for Non-Employee Directors described above. See
"Retirement Plan for Non-Employee Directors." In addition, the Company is
required to maintain on behalf of Mr. Yellowlees, or reimburse Mr. Yellowlees
for the premiums paid for, specified life insurance and additional disability
insurance coverage, with the Company's payments not to exceed $55,000 per year.
Pursuant to the agreement, Mr. Yellowlees was granted an initial option for
90,000 shares of Common Stock at an option price of $9.25 per share under the
Company's 1987 Stock Option Plan and was awarded 109,000 shares of Common
Stock as Restricted Stock under the Company's 1983 Restricted Stock Plan. Of
the shares of Restricted Stock, 36,334 were released from escrow on June 1,
1993, 36,333 were released from escrow June 1, 1994 and the remainder will be
released from escrow on June 1, 1995.
Upon termination of the agreement prior to expiration of its term (i) as a
result of Mr. Yellowlees' physical or mental incapacity, (ii) by the Company
other than as a result of specified misconduct by Mr. Yellowlees, or (iii) by
Mr. Yellowlees following a significant change in his employment duties or
conditions within three years after a change in control of the Company, (a) the
Company will be required to pay Mr. Yellowlees a severance benefit equal to
three times the greater of (A) his average annual compensation during the
preceding three years or (B) his current year compensation plus a bonus amount
equal to 75% of his current year salary, (b) the Restricted Stock awarded to
him will be fully and immediately vested, (c) all stock options held by Mr.
Yellowlees will be fully and immediately vested, and (d) the Company will pay
Mr. Yellowlees 75% of the target amount of the bonus for the fiscal year in
which his employment was terminated. For purposes of this provision of the
agreement, Mr. Yellowlees' average annual compensation is currently $548,682.
Also, upon termination of the agreement by the Company than as a result of
specified misconduct by Mr. Yellowlees or by Mr. Yellowlees following a
significant change in his employment duties or conditions with
years after a change in control of the Company, the Company is required to
maintain Mr. Yellowlees' participation in existing employee benefit plans until
the earlier of three years after his termination of employment or commencement
of his full-time employment with a new employer.
The Company, during fiscal year 1994, entered into a first renewal employment
agreement with Mr. Yellowlees, as contemplated in the initial employment
agreement described above. The three-year renewal agreement will become
effective as of May 18, 1995, and is essentially identical to the original
employment agreement, except as follows. The renewal agreement provides for a
minimum annual base salary of $470,000 which is subject to review by the Board
on or about May 18, 1995. Under the renewal agreement, the Company has agreed to
grant an additional 300,000 share non-qualified stock option for the three
period of the renewal agreement in lieu of three separate grants. The grant
contains a premium grant price feature that provides added incentive to increase
stockholder value. The option agreement will include the following provisions:
(A) One-third of the shares subject to the option will have an exercise
price equal to the closing price of the Common Stock on the date
the grant is formally approved by the Board, contemplated to be
May/June of 1995, but not less than $15.00 per share. The shares
subject to this grant will vest as follows: 20% on May 17, 1997, an
additional 25% on May 17, 1998, an additional 25% on May 17,
1999, and an additional 30% on May 17, 2000.
(B) One-third of the shares subject to the option will have an exercise
price equal to 112% of the exercise price for the shares described
in (A) above. The shares subject to the grant under this paragraph
will vest as follows: 20% on May 17, 1998, an additional 25% on
May 17, 1999, an additional 25% on May 17, 2000, and an additional
30% on May 17, 2001.
(C) One-third of the shares subject to the option will have an exercise
price equal to 124% of the exercise price for the shares described
in (A) above. The shares subject to the grant under this paragraph
will vest as follows: 20% on May 17, 1999, an additional 25% on
May 17, 2000, an additional 25% on May 17, 2001, and an
additional 30% on May 17, 2002.
The option agreement will also provide for the immediate and full vesting of the
options in the event of (i) a change in control of the company, (ii) the death
or physical or mental incapacity of Mr. Yellowlees, (iii) the termination of
employment of Mr. Yellowlees or (iv) non-renewal of his employment agreement for
an additional three year term upon the expiration of the renewal agreement on
May 17, 1998.
Executive Severance Agreements. In addition to Mr. Yellowlees' employment
agreement described above, the Company has entered into compensation
agreements with Messrs. Henderson, Braxton and Shea and certain other key
Company officers. The agreements provide that in the event that the executive
officer is terminated other than for cause (as defined in the agreements), by
reason of death or by reason of disability (as defined in the agreements), or
if the officer resigns after a significant change in his employment conditions
as specified by the agreements during the three year period following a change
in control (as defined in the agreements) of the Company, the officer would be
entitled to payment of a severance benefit. The severance benefit would be equal
to approximately three times the officer's average annual taxable compensation
from the Company during the five year period immediately preceding the officer's
termination as described above, with such multiple of three reduced by the
number of years, if any, that the officer remained employed by the Company
following such change of control. In addition, the Company would be required to
maintain the officer's participation in existing group life, medical, accident,
and equivalent plans for a period of three years (reduced by the number of years
the officer remained employed by the Company following the change of control) or
until the executive had earlier taken other full time employment. The amounts of
the average annual taxable compensation during the five fiscal years ended May
31, 1994 for the Named Executive Officers who are parties to such agreements
were approximately the following: Mr. Henderson $190,266; Mr. Braxton $142,115
and Mr. Shea $159,706.
Stockholder Return Analysis.
The following line-graph presentation compares cumulative stockholder returns of
the Company with Standard & Poor's Computer Software and Services Index and
Standard and Poor's 500 Stock Index for the five year period beginning on May
31, 1989 (assuming the investment of $100 in the Company's Common Stock,
Standard & Poor's Computer Software and Services Index and Standard and
Poor's 500 Stock Index and reinvestment of all dividends).
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
5/89 5/90 5/91 5/92 5/93 5/94
National Data Corp 100 46 41 37 49 58
S & P 500 100 117 130 143 160 167
S & P CMPTR SOFTWR & SVCS 100 114 105 123 165 198
2. AMENDMENT TO 1981 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1981 Employee Stock Purchase Plan (the "1981 Stock Purchase
Plan") was approved by the stockholders of the Company at the 1981 Annual
Meeting of Stockholders. At the 1990 Annual Meeting of Stockholders, an
amendment to the 1981 Stock Purchase Plan was approved that increased the
maximum number of shares of Common Stock as to which options may be granted
under the 1981 Stock Purchase Plan from 300,000 to 600,000 shares. On July 20,
1994, the Board of Directors approved an amendment to the 1981 Stock Purchase
Plan (the "1981 Stock Purchase Plan Amendment") and directed that such
amendment be submitted to the stockholders for approval at the Annual Meeting.
It is anticipated that management stockholders of the company will grant
authority to vote for approval of the 1981 Stock Purchase Plan Amendment.
The 1981 Stock Purchase Plan currently provides that a maximum of 600,000
shares of Common Stock shall be reserved and made available for sale
thereunder. Of such reserved shares, 564,106 shares have been issued to
employees pursuant to previous purchase periods under the 1981 Stock Purchase
Plan. The remaining 35,894 shares are subject to options outstanding in
connection with the current purchase period which began on October 1, 1993, and
will extend through September 30, 1994. The 1981 Stock Purchase Plan
Amendment would increase the maximum number of shares of Common Stock as
to which options may be granted under the 1981 Stock Purchase Plan (except by
operation of the adjustment provisions of the 1981 Stock Purchase Plan) from
600,000 to 900,000 shares, thereby making an additional 300,000 shares available
for issuance under the 1981 Stock Purchase Plan.
Under the 1981 Stock Purchase Plan, participating employees are granted
options on the first day of each purchase period designated by the Company's
Board of Directors which are automatically exercised on the last day of such
purchase period for the purchases of shares of Common Stock through the
application of payroll deductions accumulated during such purchase period.
With certain specified exceptions for part-time employees and others, all
regular employees of the Company and its subsidiaries (a group of
approximately 1,500 persons) are eligible to purchase shares under the 1981
Stock Purchase Plan. The price for shares purchased under the 1981 Stock
Purchase Plan is the lower of (i) 85% of the average market price of the
Common Stock on the first day of the applicable purchase period or (ii) 85%
of the average market price of the Common Stock on the last business day of
the month in which such purchase period ends. The average market price per
share of the Common Stock, as defined for purposes of the 1981 Stock Purchase
Plan, was $17.38 on October 1, 1993. The market value of the Common Stock was
$20.63 as of September 8, 1994.
The 1981 Stock Purchase Plan is administered by the Stock Option Committee of
the Board of Directors of the Company. The Stock Option Committee has full
authority to make, administer and interpret equitable rules and regulations
regarding the 1981 Stock Purchase Plan or to make amendments to the 1981
Stock Purchase Plan as it may deem advisable.
The following tabulation shows as to the Named Executive Officers, all current
executive officers as a group, and all employees of the Company as a group (i)
the aggregate number of shares of Common Stock subject to options granted under
the 1981 Stock Purchase Plan during the period from June 1, 1993 through May
31, 1994 and the average maximum per share Option Exercise Price thereof and
(ii) the net value of shares of the Common Stock (market value less exercise
price) realized for options exercised during such period (which options are not
necessarily the options granted during the period).
Options Granted Options Exercised
Aggregate Net
Name and Position Shares (#) Price ($/sh) Value Realized ($)
Robert A. Yellowlees
Chairman and Chief
Executive Officer, President 1,438 $14.77 $30,116
and Chief Operating Officer
J. David Lyons
Executive Vice President,
Marketing & Sales - - -
James R. Henderson
Executive Vice President,
Health Care Application - - -
Systems and Services
Jerry W. Braxton
Executive Vice President
and Chief Financial Officer 528 14.77 17,010
Kevin C. Shea
Executive Vice President,
Retail Applications Systems
and Services 704 14.77 13,606
All current executive
officers 2,670 14.77 67,530
All employees 62,150 14.77 1,024,094
The 1981 Stock Purchase Plan is designed to qualify as an Employee Purchase
Plan under Section 423 of the Internal Revenue Code of 1986, as amended. A
general summary of the federal income tax consequences regarding the 1981
Stock Purchase Plan is stated below.
Neither the grant nor the exercise of options granted under the 1981 Stock
Purchase Plan will have a tax impact on the participant or the Company. If an
employee disposes of the stock acquired upon the exercise of his option any time
after two-years from the date of grant, then the employee will recognize
ordinary income equal to the difference between (a) the lesser of the fair
market value of the stock at the time of disposition or the fair market value
of the stock at the date the option is granted and (b) the purchase price of
the Common Stock. Any gain in addition to this amount will be treated as long
term capital gain. If an employee holds Common Stock at the time of the
employee's death, the holding period requirements are automatically deemed
to have been satisfied and ordinary income must be realized by the employee's
estate equal to the difference between (a) the lesser of the fair market value
of the Common Stock at the time of death or the fair market value of the
Common Stock at the date the option is granted and (b) the purchase price of the
Common Stock. The Company will not be allowed a deduction if the holding
period requirements are satisfied. If an employee disposes of Common Stock
before expiration of two years from the date the option is granted, then the
employee must treat as ordinary income the excess of the market value of the
Common Stock on the date of exercise of the option over purchase price of the
Common Stock. Any additional gain will be treated as long term or short-term
capital gain or loss, as the case may be. The Company will allowed a
deduction equal to the amount of ordinary income recognized by employee.
The affirmative vote of the holders of a majority of the shares of Common Stock
represented and entitled to vote at the Annual Meeting at which a quorum is
present is required for the approval of Proposal 2. With respect to abstentions,
the shares are considered present at the meeting, but since they are not
affirmative votes, they will have the same effect as votes against the proposal.
With respect to broker non-votes, the shares are not considered present at the
meeting for the particular proposal for which the broker withheld authority.
The Board of Directors recommends that stockholders grant authority to vote
"FOR" approval of the proposed amendment to the 1981 Employee Stock Purchase
Plan. If a choice is specified on the proxy by the stockholder, the shares
will be voted as specified. If no specification is made, the shares will be
voted "FOR" the proposal.
AUDITORS
Arthur Andersen & Co. served as the Company's auditors for the three fiscal
years ended May 31, 1994, and that firm of independent public accountants is
serving as auditors for the Company for the current fiscal year which began
June 1, 1994. Representatives of Arthur Andersen & Co. are expected to be
present at the Annual Meeting and will have an opportunity to make a statement
if they so desire and will be available to respond to appropriate questions.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation of stockholders of record by mail, telephone, or personal contact,
arrangements will be made with brokerage houses to furnish proxy materials to
their principals, and the Company may reimburse them for mailing expenses.
Custodians and fiduciaries will be supplied with proxy materials to forward to
beneficial owners of stock. The Company has also engaged Georgeson & Co. to
solicit proxies on behalf of the Company, and it is estimated that Georgeson &
Co.'s fees for its services will not exceed $6,000.
OTHER MATTERS
Management does not know of any matters to be brought before the Annual
Meeting other than those referred to above. If any other matters properly come
before the meeting, the persons designated as proxies will vote on such matters
in accordance with their best judgment.
Whether or not you expect to be present at the meeting in person, please vote,
sign, date, and return promptly the enclosed proxy in the enclosed envelope. No
postage is necessary if the proxy is mailed in the United States.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented for consideration at the 1995
Annual Meeting of Stockholders of the Company must be received by the Company
at its principal executive offices on or before May 25 included in the
Company's proxy statement and form of proxy relating to the 1995 Annual
Meeting of Stockholders.
SECTION 16(a) REPORTING
Based solely on a review of the copies of reporting forms furnished to the
Company, or written representations that no annual forms (Form 5) were required,
the Company believes that, during the 1994 fiscal year, all of its officers,
directors and 10% stockholders complied with the reporting requirements of the
SEC regarding their ownership and changes in ownership of Common Stock (as
required pursuant to Section 16(a) of the Securities Exchange Act of 1934.)